DataWatch: An Undiscovered Pick With 50% Upside

When two of the best small-cap experts I know are recommending the same stock, I pay close attention.

Back in September, when I was attending the Value Investing Congress, I met a talented young investor. I had followed his work for nearly one year, and quickly recognized his name when I bumped into him at a coffee break.

He was easy to spot, since he was one of the youngest people attending the VIC. His name is Galileo Russell, and he’s a student at New York University’s Stern School of Business.

I had become familiar with Galileo’s work on Tesla Motors (Nasdaq: TSLA) last December when I started researching the stock. At the time, he was extremely bullish on the stock and described Tesla as “The Apple of the Auto World.” He made this claim long before any investment analysts were making comparisons between the two companies or describing Elon Musk as the next Steve Jobs.

When we chatted at the Time Warner Center, I asked Galileo for his top investment idea. He described another stock that – like Tesla in late 2012 – is misunderstood and offers investors a big opportunity for profits.

That company is DataWatch (NASDAQ: DWCH).

The funny thing is, I had already heard of this company. That’s because my colleague Tyler Laundon has been recommending the same stock.

You’re probably familiar with Tyler’s work. He’s the advisor of our 100% Letterinvestment newsletter. His service aims to uncover stocks with 100% profit potential in the next 12 to 18 months. DataWatch is one of his favorite picks.

Here at Wyatt Investment Research, our analysts will occasionally recommend the same stocks. That’s far more common when it comes to big companies like Apple or McDonald’s. But it’s very unusual when it comes to small companies.

The fact that both Tyler and Galileo were recommending DataWatch is more than a coincidence. In my mind, it means that two independent analysts that I know and trust see a big opportunity in the same stock.

DataWatch is a small company. With shares trading at $28, the company has a market value of $185 million. That makes DataWatch a microcap, and just three Wall Street investment bank analysts follow it.

The company operates in a high-growth sector known as “big data.” What is big data? This is how Tyler describes it:

“Big Data is just a fancy term to describe a growing wave of digital information that consumes a lot of memory space…Consider the business functions of multi-billion-dollar companies like financial services company Broadridge Financial, health-care provider United Health Group and consumer-goods company Procter & Gamble.

All of these companies generate massive amounts of digital data (and they all happen to be customers of the company I’m recommending today). But they also consume a ton of incoming data. If organized and analyzed together, these numbers can help companies make better business decisions.”

- Tyler Laundon, 100% Letter November 2012

Tyler first recommended the stock in November 2012 when shares of DataWatch were trading at $17.75. He recommended it again in March after shares had fallen to $12.85.

I wish I had followed his advice. Shares have already jumped 85% since his recommendation. But he thinks there is lots more upside to DataWatch shares…

Galileo thinks so too. When he mentioned the stock last month, I got excited and asked him to write a detailed report for WyattResearch.com about DataWatch. This is the first time he’s written for Wyatt Investment Research.

After receiving Galileo’s report and reviewing Tyler’s analysis, I plan to buy DataWatch shares in my personal investment account. I don’t own the stock yet, but plan to build a position in the stock below $30. The company is reporting earnings on Nov. 19, and I think that could be another catalyst for the stock.

Further Reading:

“Because I’m a value investor I love bargains. You can imagine, then, the anticipation when I found a bargain opportunity to invest alongside one of the great value investors – Carl Icahn.” Read more here: A 40% Return in Four Months

“Apple (NASDAQ: AAPL) has taken a lot of flak on Wall Street in the last year. Slowly but surely, however, the stock is making a comeback. Here are three reasons why.” Read more here: Three Reasons Apple is Headed to $600

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